Hudaco Industries Limited · JSE:HDC
Hudaco Industries — H1 2023 Earnings Presentation
42 slides from Hudaco Industries's earnings presentation, May 31, 2023
Slide 1: Unaudited Interim Results
UNAUDITED INTERIM RESULTS For the six months ended 31 May 2023 1
Slide 2: Agenda
AGENDA ▪ General business environment ▪ Hudaco in the general business environment ▪ Business model ▪ Reporting segments ▪ Operating profit and margins ▪ Financial review ▪ Outlook 2
Slide 3: General Business Environment
GENERAL BUSINESS ENVIRONMENT 3
Slide 4: General Business Environment
GENERAL BUSINESS ENVIRONMENT ▪ Another challenging six months ▪ Government still neglects to tackle infrastructure deterioration, address rampant corruption and create jobs, all of which is needed to stimulate the economy ▪ Increased load-shedding and inefficient ports ▪ Exchange rate volatility, ri
Slide 5: Hudaco in the General Business Environment
HUDACO IN THE GENERAL BUSINESS ENVIRONMENT 5
Slide 6: Hudaco in This Environment
HUDACO IN THIS ENVIRONMENT ▪ Notwithstanding the challenges, our strong performance over the last three years continues ▪ Hudaco has once again shown its resilience ▪ Continue to deliver highly commendable results in tough times ▪ Stuck to our strategy and core business model ▪ Invested more into bu
Slide 7: Results Summary 2023 vs 2022
RESULTS SUMMARY 2023 VS 2022 Turnover 12,4% to R4,3bn Operating profit 2,8% to R465m Profit for the period 0,3% to R293m Headline and comparable earnings per share 8,1% to 926 cents Interim dividend per share 8,3% to 325 cents Cash generated from operations R246m Repurchase of shares R112m 7
Slide 8: Business Model
Hudaco BUSINESS MODEL
Slide 9: The Hudaco Business Model
THE HUDACO BUSINESS MODEL ▪ Hudaco’s main business is the importation and distribution of high-quality branded automotive, industrial and electronic consumable products ▪ The concept of “value-added distribution” is key to our business model ▪ Agency agreements generally restrict our activities to A
Slide 10: Features of Value-Added Distribution
FEATURES OF VALUE-ADDED DISTRIBUTION ▪ Focused business units with application advice ▪ Technical specification and product knowledge ▪ Training ▪ Credit provision ▪ Drives customer retention and supplier loyalty ▪ Level 3 B-BBEE credentials (110% procurement recognition) Inventories R2 665m ▪ Insta
Slide 11: Reporting Segments
REPORTING SEGMENTS 11
Slide 12: Contribution by Segment
CONTRIBUTION BY SEGMENT Contribution to H1 2023 operating profit (before shared services and head office) 39% 61% H1 2022 41% 59% Consumer-related products Engineering consumables 12
Slide 13: Consumer-Related Products
CONSUMER-RELATED PRODUCTS Consumer-related products segment imports and distributes branded products driven by consumer spending and generally sold to installers. Consumer-related products (12 businesses) ▪ Automotive aftermarket products ▪ Power tools and fasteners ▪ Data networking equipment ▪ Bat
Slide 14: Segment Results Consumer-Related Products
SEGMENT RESULTS CONSUMER-RELATED PRODUCTS Turnover Op Margin Operating Profit Rm 2023 % ch 2022 2023 2022 2023 % ch 2022 Ongoing 2 038 8,1 1 886 12,8 15,4 262 (9,7) 290 operations Acquisition 204 95 15,7 12,9 32 12 Segment total 2 242 13,2 1 981 13,1 15,2 294 (2,8) 302 ▪ Invested more in and had mar
Slide 15: Engineering Consumables
ENGINEERING CONSUMABLES Engineering consumables segment imports and distributes branded products generally used in the repair and maintenance of machines. Engineering consumables (18 businesses) ▪ Bearings, belting and power transmission ▪ Diesel engines and spares ▪ Electrical power transmission ▪
Slide 16: Acquisition
ACQUISITION ▪ Target date: 1 September 2023, subject to suspensive conditions ▪ “One Source Total Fire Protection” • Fire detection • Fire containment protection • Fire suppression systems • Onsite and offsite cylinder refills • Cylinder revalidation and hydrostatic testing • Product training and sy
Slide 17: Segment Results Engineering Consumables
SEGMENT RESULTS ENGINEERING CONSUMABLES Turnover Op Margin Operating Profit Rm 2023 % ch 2022 2023 2022 2023 % ch 2022 Ongoing 2 023 11,8 1 810 10,1 10,8 204 4,3 196 operations Acquisition Segment total 2 023 11,8 1 810 10,1 10,8 204 4,3 196 ▪ This segment continues to show its resilience ▪ Increase
Slide 18: Group Results
GROUP RESULTS Turnover Op Margin Operating Profit Rm 2023 % ch 2022 2023 2022 2023 % ch 2022 Consumer- related 2 242 13,2 1 981 13,1 15,2 294 (2,8) 302 products Engineering 2 023 11,8 1 810 10,1 10,8 204 4,3 196 consumables Head office, shared (15) (9) (33) (46) services and eliminations Total group
Slide 19: Operating Profit and Margins
OPERATING PROFIT AND MARGINS 19
Slide 20: Turnover
TURNOVER R billion 4.5 4.4 4.3 4.0 3.9 3.8 3.5 3.5 3.6 3.4 3.4 3.0 3.2 3.2 3.0 2.5 2.7 2.6 2.0 1.5 1.0 0.5 0.0 2017 2018 2019 2020 2021 2022 2023 H1 H2 20
Slide 21: Gross Profit Margin
GROSS PROFIT MARGIN 2023 2022 Margin (%) Turnover 100% 100% Gross profit 35,2% 36,6% 21
Slide 22: Operating Expenses Margin
OPERATING EXPENSES MARGIN 2023 2022 Margin (%) Turnover 100% 100% Gross profit 35,2% 36,6% Operating expenses 24,3% 24,6% 22
Slide 23: Operating Expenses to Turnover
OPERATING EXPENSES TO TURNOVER % 30.0 25.0 25.8 26.1 26.0 26.6 25.6 24.5 24.3 20.0 15.0 10.0 5.0 0.0 2017 2018 2019 2020 2021 2022 2023 H1 23
Slide 24: Operating Profit Margin
OPERATING PROFIT MARGIN 2023 2022 Margin (%) Turnover 100% 100% Gross profit 35,2% 36,6% Operating expenses 24,3% 24,6% Operating profit 10,9% 12,0% 24
Slide 25: Operating Profit Margin
OPERATING PROFIT MARGIN % 14 12 13.0 12.5 12.1 12.0 11.9 11.4 10 10.7 10.6 10.9 10.1 9.8 9.3 8 6 4 2 3.0 0 2017 2018 2019 2020 2021 2022 2023 H1 H2 25
Slide 26: Financial Review
FINANCIAL REVIEW 26
Slide 27: Profit
PROFIT Rm 2023 % ch 2022 Turnover 4 250 12,4 3 782 Ongoing operations 4 046 9,8 3 687 Acquisition 204 95 Gross profit 1 499 8,2 1 385 Operating expenses 1 034 10,8 933 Ongoing operations 1 000 8,9 918 Acquisition 34 15 Operating profit 465 2,8 452 Ongoing operations 433 (1,7) 440 Acquisition 32 12 2
Slide 28: Profit
PROFIT Rm 2023 % ch 2022 Operating profit 465 2,8 452 Net interest on funding (50) (27) Imputed interest on leases (12) (14) Profit before taxation 403 (2,1) 411 Taxation (110) (119) (Rate 2023: 27,2% 2022: 28,9%) Profit after taxation 293 0,3 292 Non-controlling interest (28) (35) Attributable earn
Slide 29: Comparable Earnings
COMPARABLE EARNINGS R million 330 300 322 270 280 240 257 265 243 210 227 230 215 210 180 150 164 165 153 120 90 60 30 22 0 2017 2018 2019 2020 2021 2022 2023 H1 H2 29
Slide 30: Earnings per Share and Dividends
EARNINGS PER SHARE AND DIVIDENDS Cents 2023 % ch 2022 Earnings per share Comparable 926 8,1 857 Basic 926 8,1 857 Headline 926 8,1 857 Dividends per share - Interim 325 8,3 300 - Final 625 Total 925 Dividend cover H1 (times) 2,85 2,86 30
Slide 31: Share Repurchase Programme
SHARE REPURCHASE PROGRAMME (excludes treasury shares) No. of Weighted Cost % shares avg shares Rm 30 Nov 2019 31 645 703 100,0% 31 645 703 2020 Repurchases 1 024 600 82 30 Nov 2020 30 621 103 96,8% 31 529 399 2021 Repurchases 609 211 69 30 Nov 2021 30 011 892 94,8% 30 356 525 2022 Repurchases 928 74
Slide 32: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Rm 2023 2022 Working capital 2 758 2 515 Inventories 2 665 2 290 Receivables 1 528 1 297 Payables (1 435) (1 072) Property, plant and equipment 348 294 Right-of-use assets 325 382 Goodwill and intangibles 1 226 1 222 Tax 72 55 Net assets 4 729 4 468 32
Slide 33: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Rm 2023 2022 Equity 3 241 3 082 Bank borrowings 1 094 860 Lease liabilities 383 438 Due to vendors 6 28 Tax 5 60 Total equity and liabilities 4 729 4 468 33
Slide 34: Working Capital Elements
WORKING CAPITAL ELEMENTS In months of sales 5 4 3 2 1 0 H2 17 H2 18 H2 19 H2 20 H1 21 H2 21 H1 22 H2 22 H1 23 -1 -2 Inventory Payables Receivables Net W Cap One month of sales 2021 = R564m (H1) 2022 = R630m (H1) 2023 = R708m (H1) 2021 = R646m (H2) 2022 = R728m (H2) 34
Slide 35: Inventory
INVENTORY In months of sales 5 4.4 4 3.8 3.5 3.6 3.4 3.3 3 3.2 3.2 3.1 3.1 3.1 2.9 2.7 2 1 0 2017 2018 2019 2020 2021 2022 2023 H1 H2 35
Slide 36: Cash Flow
CASH FLOW Rm 2023 2022 Cash from trading 581 558 Increase in working capital (335) (459) Cash from operations 246 99 Tax paid (154) (77) Cash from operating activities 92 22 Invested in new business (24) (75) Invested in software and ppe (70) (33) Cash flow after investing activities (2) (86) Share-
Slide 37: Key Financial Points
KEY FINANCIAL POINTS ▪ Inventories are costing more and will turn into higher sales ▪ Stock levels are up for busier H2 ▪ The operating margin is healthy ▪ The expense ratio is down despite inflationary pressures ▪ Interest rates are higher, so we will work on reducing debt ▪ Businesses remain cash
Slide 38: Outlook
OUTLOOK 38
Slide 39: Outlook for H2 2023
OUTLOOK FOR H2 2023 ▪ Inevitably, there will be more load-shedding and the usual challenges of doing business in South Africa, including the government’s ineptitude ▪ Optimistic that the strong performance of the last 3 years is sustainable ▪ Alternative energy, CADAC, security and communications, m
Slide 40: Contact Details and Disclaimer
CONTACT DETAILS AND DISCLAIMER 40
Slide 41: Contact Details
CONTACT DETAILS Graham Dunford Clifford Amoils Chief executive Financial director Tel +27 11 657 5004 Tel +27 11 657 5002 grahamd@hudaco.co.za camoils@hudaco.co.za www.hudaco.co.za 41
Slide 42: Disclaimer
DISCLAIMER The preceding presentation contains forward-looking statements about the Hudaco Group’s operations and financial position. They are prepared in good faith and are based on Hudaco’s best estimates and information at the time of preparing the presentation. They are nonetheless subject to si